For months now, buyers and analysts decried the lack of apartment portfolios available for trade on the market. But as cap rate have fallen, that’s slowly changing. Consider the 3,237-unit portfolio that Houston-based Camden property Trust and New York-based DRA Advisors put on the market from their joint venture in mid-October, according to New York-based commercial real estate research firm Real Capital Analytics (RCA).
Camden’s nine-property Midwestern portfolio trails only the 15-property, 4,568-unit Houston portfolio that Dallas-based CrestMarc put on the market in July.
Peter Donovan, senior managing director of Los Angeles-based CB Richard Ellis’ Multi-Housing Group, says the Camden sale may not be the sign of a greater trend. Instead, it’s just further proof that some REITs, like Chicago-based Equity Residential, are using the low cap rate environment to further prune their portfolios.
“They’re older assets in market where they think probably realized about as much value as they’re going to realize for the foreseeable future,” Donovan says. “They’re looking to go to the primary markets and update the age and quality of their portfolio. They have a very strategic long-term view of what they’re doing.”
In fact, Donovan doesn’t really know if there’s any kind of trend with portfolio sales. “It all depends on who the seller is and what the motivation is,” he says.
The rise of portfolios on the market may just be a byproduct of additional product on the market. More apartments are being put on the market. In the first three quarters of 2010, apartment offerings have risen from $6 billion in the first quarter to $7.4 billion in the second quarter and $10.4 billion in the third quarter.
“I think [the rise of portfolio sales] is primarily related to the lack of inventory of quality property out there available for purchase,” says Ben Thypin, senior market analyst at RCA. “Sellers/owners of the portfolios are seeing the properties that do sell trade at very competitive pricing and they also know how shallow the inventory is, so they probably think they can get a good price for their assets in a market that is hungry for quality assets.
Thypin could see more product coming out, though. “I think it is safe to say that sellers will continue to offer portfolios like this for the foreseeable future as long as pricing for quality assets is competitive,” he says.
ON THE BLOCK
Here's a look at the seven largest portfolios on the block this year.
|Seller||No. of Buildings||No. of Units|
|Camden and DRA||9||3,237|
|GEM Realty Capital JV Schenck Realty||7||2,048|
|Rockpoint Group and Sawyer Realty Holdings||6||1,984|
|Great Atlantic Management||6||1,834|
Source: Real Capital Analytics